Belgian labour market policy unrealistic, says report

The Jadot Report - an annual evaluation of Belgium's employment policies published in November 1998 - comes to a number of harsh conclusions: Belgian employment policy is based on good intentions but lacks realism; the country's pay guidelines cannot be controlled; the system of Local Employment Agencies offers no real chances for social mobility; and proposals drawn up by the social partners relating to the "unemployment trap" lack coherence. Finally, according to the report, the adaptation of employment policies to European Union norms spell the end of the current Belgian social model, dating from 1944.

The latest annual evaluation report on Belgian employment policy was published on 25 November 1998. The report ("Federal employment policy. Evaluation report 1998", M Jadot, Federal Ministry of Employment and Labour, Brussels, November 1998) is a performance review carried out by the Ministry of Employment under the responsibility of its secretary general, Michel Jadot. The "Jadot report" is always anticipated with interest as the secretary general does not hesitate to offer his direct and straightforward comments on the government's employment policies. The third report honours this tradition.

Failure of pay guidelines and local employment agencies

The report criticises the current statutory pay guidelines policy (BE9809242F). This measure, designed to guarantee that wage increases will be limited to the level of those in neighbouring countries, has failed, according to the Jadot report, as it cannot be monitored. The law lays down an administrative penalty and fines for firms that do not comply with the norm. As the report puts it: "Firms find out from the inspection services of the Ministry of Labour about the possible penalties in case they break the rules. Penalties include fines payable from the budget that they have put aside for wage increases." The effect is that a number of wealthy sectors allow for higher wage increases, which creates discrimination between different types of worker.

The Local Employment Agency (Plaatselijk Werkgelegenheidsagenstschap/Agence locale pour l'emploi,PWA/ALE) system is a quantitative success (BE9708213F). These agencies allow long-term unemployed people to work officially in local service activities for up to 45 hours per month, for which they receive an extra premium (BE9807148F). On 30 June 1998, 552 Belgian communities - 94% of the total - had a PWA/ALE. In 1998, about 35,000 people, 82% of whom were women, were active through these services. The jobs they performed were primarily household chores (51%), gardening (4%) and a combination of other odd jobs in and around the house. In 1997, the total number of PWA/ALE hours worked represented about 4,500 full-time equivalent jobs. A considerable number of jobs specifically for long-term unemployed people have thus been created through the system. However, the Jadot report comes to the conclusion that the main goal of the system, namely renewed participation on the regular labour market, has not been realised. The unemployed people who work extra hours under the scheme generally remain in the PWA/ALE system. The main reason for this failure to move up the "employment ladder" is that the system has not created the necessary means to support such a step. These means would need to include chances for re-education and training, and moving out of unemployment as a result of attaining the status of "employability". PWA/ALE workers remain at present officially unemployed, and they do not work under an employment contract.

Analysis of unemployment trap is false

Much discussion in Belgium has centred on the so-called unemployment trap. It is alleged that a number of low-skilled workers do not take on jobs because the differential between their current unemployment benefits and their possible (minimum) wages is so small that they prefer to stay unemployed. If transport costs, childcare and other expenses are added in, many believe that it may not be worth accepting a job. In their recent intersectoral agreement for 1999-2000 (BE9811252F), the social partners proposed the introduction of fiscal and parafiscal relief for the lowest paid workers in order to increase differentials with unemployment benefit. The International Monetary Fund was quick to speak well of such measures.

In his report, Mr Jadot claims that this analysis is wrong for following reasons:

  • compared with neighbouring countries, unemployment benefit in Belgium is generally lower for short-term unemployed people, although it is true that it remains rather high in the long term; and
  • minimum wages are rather high from an international perspective, because most sectors have agreed levels that are between 30% and 40% higher than the official national minimum wage.

The authors emphasise that the problem cannot be analysed from a purely economic point of view: "In many cases, the unemployed worker does not have the qualifications required to meet the demands of the job market. In the group of unemployed confronted most frequently with the possible unemployment trap phenomenon - that is, those with only a lower secondary education - more than three quarters have insufficient job skills."

End of the Belgian social model?

In his introduction to the report, Mr Jadot maintains that the famous Belgian "social model", as settled in the 1944 Social Pact, is dead, allegedly killed by the European Union and its employment policy, which is said to set pay and other norms, whereas the unique character of the Belgian model implied the following characteristics.

  1. Social welfare and pay increases were linked to increases in productivity: when productivity increased, pay increases followed. This principle has been eroded because of stiff competition in Europe and a number of wage norms that are designed to regulate the process of wage formation. The 1993 European Commission White Paper on Growth, competitiveness, and employment. The challenges and ways forward into the 21st century clearly states that increases in productivity ought to be used to finance new investments. "The idea that they have to serve increases in economic welfare is nowhere to be found", says the Jadot report. The fact that the Belgian government has strayed from the path outlined in the 1944 Social Pact can be demonstrated very simply: between 1980 and 1996, the purchasing power of the average blue-collar worker in industry declined by about 15%.
  2. The social partners were exclusively involved in discussions on the distribution of productivity, wealth and the creation of employment. The cornerstone of the Belgian bargaining tradition was its particularly low level of government involvement. From the beginning of the 1980s, however, the government has become an increasingly active party in negotiations by imposing further rules and norms. These have included pay guidelines, as well as regulations governing the distribution of work, reductions in working time and so on. The European model reinforces such tripartite structures: the heads of government determine the outlines of the European employment policies that have to be followed by the Member States. In other words, the EU predetermines the limits and even the content of negotiations.
  3. Another important breach with the past is the continued flexibilisation of the Belgian labour market. The 1944 Pact implicitly started from the idea of full-time work with an open-ended employment contract and a certain minimum level of social protection. It is clear that this notion of "normal" labour is a thing of the past. The increasingly flexible character of work, which started largely in the 1980s, can be illustrated by using a number of indicators: (a) the number of part-time workers has doubled since 1983 to about 17% of the work force; (b) between 1990 and 1997 the number of temporary workers increased by 25%. Most of these workers work through temporary work agencies, which now represent about 1.4% of the workforce; and (c) between 1991 and 1997 the number of wage earners with more than one job increased by 12% a year.

It is clear that for Mr Jadot the typical features of the Belgian model have been eroded and that what the country has received in return does not live up to expectations.

Commentary

Official reactions to the report have not yet been formulated. However, it has generally been praised for its wealth of evaluative and quantitative analysis. The more political conclusions are generally seen as personal comments by Mr Jadot. The criticism of the PWA/ALE system is parallel with that heard in trade union circles. They also want to transform the system into one characterised by the provision of normal employment contracts and more opportunities to facilitate re-entry into the traditional labour market.

The social partners have been stressing for several years that bipartite negotiations, without the government's involvement as a third and limiting party, ought to be the focal point for the bargaining process. That is one of the reasons why they were so pleased with the national intersectoral agreement reached in November 1998. (Peter van der Hallen, WAV)

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